The pending Nokia/Sanyo JV ...
Jeffrey,
<< Eric, I don't recall reading your opinion concerning the Nokia/Sanyo CDMA joint venture, on any board you frequent. >>
Probably because I haven't posted one. <ggg>
Also I've been in primarily 'read-only' mode on all boards I frequent for the last several months because I find preparing for early retirement a little more involved than I had initially planned and the retirement date I'd arranged with HR keeps shifting out a quarter at a time.
Hopefully I've accepted my last corporate project (ironically coordinating the formation of a JV after just concluding preparation and execution of an exit strategy from a JV and OEM arrangement that simply didn't work for either party), and hopefully I'll be free of corporate obligations shortly after I turn 62 in June and won't be sticking around to celebrate the anniversary of my 40th year in IT Sales/Sales Management in December.
Additionally, by end of year Sheila and I hopefully will be relocated 20 to 40 miles downstate in a manse closer to the beaches and ½ the size of this one and easier to maintain internally and externally. I do read or at least skim all posts on the wireless boards I frequent here on SI, on TMF, and on IHub but it'll be a while before I'm much of a contributor.
I do have a post in progress on my thoughts on the declining (share wise) CDMA market overall, the respective Nokia/Sanyo spins of their CDMA businesses and their CDMA JV formation, and implications for QUALCOMM as well as Nokia, but it's wise to note that as Nokia CFO Rick Simonson emphasized again last week at the GS tech conference the Nokia/Sanyo deal is still a "preliminary" agreement.
As a consequence there isn't a lot to be gleaned from press reports that triggered off the initial press conference and there is a lot of superfluous and spurious conjecture. misstatement of combined share, reasons for the action, reasons for the chances of success for the JV, etc.
There are fortunately a few conscientious analysts that have been digging under the covers and ferreting out more detail and managed to unearth some on the structure of the JV, who will manufacture what, where, and when, but even they don't have all the detail they would like to have. The GS team has the best analysis I've seen and I've generally considered them to be lightweights.
As for a summary of my opinion as it has evolved since the Nokia/Sanyo Valentines Day card from Barcelona was delivered, I'll simply say that I think the deal is an extremely Nokia shareholder friendly way for Nokia to deemphasized CDMA involvement and resource drain, while remaining highly focused on the much larger and faster growing GSM/3GSM ecosystem, and get the low margin CDMA business -- for everybody but QUALCOMM -- off their books. Non-shareholder friendly alternatives that would have, IMO, been beating a dead horse would have included ...
1.) Exiting the CDMA market altogether as Sony Ericsson and Ericsson did in both handsets and infrastructure (a real negative for QUALCOMM, IMO) ...
2.) Purchasing Sanyo's marginally profitable CDMA BU to gain Japanese presence and increased scale ...
3,) Increased use of ODMs with the requisite obligation to manage the OEM/ODM relationship with the hope that the relationship turned into a meaningful and successful partnership ...
4.) Seeing the IS-856 (1xEV-DO) chipset development through to completion and commercial deployment in handsets, and continuing to expend relatively large development resources on a relatively small and fragmented mass market where few if any OEMs or ODMs are experiencing a satisfactory or meaningful ROI, and the value add flows primarily to QUALCOMM ...
So far so good, but putting a JV together is tough work and more JV's fail than succeed. Wingcast and Wireless Knowledge are just two of all too numerous examples of notable promising but poorly conceived, poorly managed, and poorly executed abject failures.
Those that succeed generally take time to gain traction as the successful Sony Ericsson JV certainly now has. While increasing their own margins Nokia will wind up with one oar in the CDMA waters rather than two, but I think they have lined up with the best available JV partner other than perhaps Pantch-Curitel (with SK Teletech rolled in).
Sanyo has relatively few major customers -- very few customers period -- but they have done a great job with both KDDI and Sprint and they manufacture a very good quality CDMA handset with very good RF and audio properties -- on a par and some would argue better even better than Nokia who is better than almost everybody else in this regard -- and certainly have better mastery of the Sprint Vision software stack than Nokia (who is currently delivering their 3rd Vision enabled handset) and Moto which has never qualified a Vision handset despite all their efforts and wheel spinning and repeated promises to do so. Nokia, OTOH, has mastered the BREW enabled Verizon GIN software stack and the software stack at Reliance which Sanyo hasn't.
This could be a good marriage but only time will tell.
Changing Strategies
<< Would you mind sharing your thoughts as to why Nokia decided to now change strategies (and horses) in CDMA. >>
They changed strategies for several reasons, the principle one being that their considerable investment in QUALCOMM's proprietary CDMA technology was not producing adequate ROI and was a drain on the Mobile Phones division's (one of 3 Nokia divisions that manufacture mobile devices for Nokia but the only one producing CDMA handsets) margins.
Does anyone make reasonable operating margins manufacturing CDMA handsets?
Industry leader (in CDMA) unit shipments LG ,whose unit shipments accounted for 55% of their production had an absolutely pathetic 4.8% operating margin for the year and those margins were bolstered by strong 3GSM UMTS shipments in Q4.
The second reason is that projected share growth of GSM/3GSM is considerably more promising and the market share growth of CDMA is considerably less promising than when they made their initial recommitment to CDMA and make or buy decisions on cdma2000 which QUALCOMM has, for all practical purpose, dead ended at the decidedly unrobust and inefficient 1xRTT Release Zero level, in favor of IS-856 (1xEV-DO). Nokia's investment in cdma2000 Releases C/D is, as a consequence. long since written off, as is everybody else's that thought that were contributing to an open committee based standard.
There are, several other reasons. I'll explore those later.
Changing Horses
<< Would you mind sharing your thoughts as to why Nokia decided to now change strategies (and horses) in CDMA, and the implications for both Nokia, and Qualcomm? >>
By changing horses perhaps you mean changing chipset suppliers?
If that is the case, I would advise not to count your chipsets before they hatch.
While I have a great deal of respect for John Hayman, I noticed he referred to a "former chairman of Nokia," Ple3ased to note that the "former CEO of Nokia for the last 13½ years" has been Jorma Ollila and he has not yet sailed off anywhere and will remain COB of Nokia when he hands over the reigns to his alter-ego Olli-Pekka (legally trained, former CFO several times and maybe the best ever in the business, with exceptional exposure to operations -- certainly a tougher and meaner bad-ass than the more diplomatic and technology agnostic Ollila) before becoming COB of the 4th largest corporation in the world.Thanj your lucky socks that their are no "little Ollila's" floating around Nokia and that corporate governance in that abnormally fiscally astute and straight-arrow corporation would never permit succession by same if there were.
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Nokia has evidently cancelled their plans to continue development of a 1xEV-DO chipset (and use an ODM or ODMs in the interim) but expect to see an SKT Teletech manufactured Nokia (Noia-Sanyo) slider on Verizon shelves before long and an ultra-low cost handset using a QUALCOMM or VIA chip (or both) manufactured in a Chinese or Taiwanese facility delivering shortly in emerging markets.
In the mid-range ($100 -$250 wholesale ASP range) expect many existing handsets and new ones on the roadmap to ship using the excellent 1xRTT chipset designed by Nokia with baseband manufactured by TI in the near to medium term future using the extremely flexible Nokia S40 UI and development platform
Implications for both Nokia, and Qualcomm?
<< Would you mind sharing your thoughts as to why Nokia decided to now change strategies (and horses) in CDMA, and the implications for both Nokia, and Qualcomm? >>
Yet TBD, and as PJ would say, more detail necessary.
I will link my more comprehensive post on this subject from the Nokia board I moderate to you when I complete it, but those are some preliminary comments and best I can do on short notice.
Best,
- Eric - |
